toledoblade.com --

COLUMBUS - On April 3, the day The Blade broke the story about the state's $50 million investment in rare-coin funds controlled by Tom Noe, Democratic legislators called on state Auditor Betty Montgomery and several other Republican statewide officeholders to investigate.

The story was published as some were pushing for the Ohio Bureau of Workers' Compensation, which made the investment in rare coins, to reduce benefits to injured workers to save employers money, said state Rep. Jeanine Perry (D., Toledo).

"Everybody wants to know the answers when questions come out that affect people in the pocketbook," Mrs. Perry said two months ago.

Yet, it took 43 days after The Blade's first story for Ms. Montgomery to announce that her office would do a special audit of the rare-coin investment.

Democrats have charged that Ms. Montgomery, a former Wood County prosecutor and state senator, didn't act sooner because she has known Mr. Noe for several years and has received thousands of dollars in campaign contributions from him and his wife, Bernadette. She relinquished $8,150 in contributions last week.

An aide to Ms. Montgomery said she met Mr. Noe, who grew up in Bowling Green, in the 1980s.

Democrats also have asserted that Ms. Montgomery, who took office as auditor in 2003, was asleep at the switch as the state's rare-coin investment unraveled.

Audits conducted in June, 2004, for the bureau by two firms - Plante & Moran and Doyle & McDonnell - and reported to the bureau three months later noted that 20 percent of the coins held in both Capital Coin Funds could not be observed because they were off-site.

On May 1, The Blade, based on a redacted version of the audit, reported that 119 coins purchased for $93,000 could not be accounted for from the fund's Colorado office and that fund managers said a former employee had possibly stolen the coins. That came after the newspaper reported April 3 that two coins valued at $300,000 were reported stolen in the mail at the Colorado office.

"I know Tom Noe; he is a gregarious, outgoing guy," said House Minority Leader Chris Redfern, a Democrat from Catawba Island. "The immediate thought is, 'How on earth could this have happened?' After that one-hour conversation with yourself, you are still charged to be auditor of state and you have to set aside your relationship with the guy, and she did not do that."

Unlike her other two Republican opponents in the gubernatorial race, Attorney General Jim Petro and Secretary of State J. Kenneth Blackwell, Ms. Montgomery did not grant a request for an interview last week.

But Ms. Montgomery, in a recent interview and at a news conference last week, said she had not delayed taking action.

She said she talked to Inspector General Tom Charles on April 5 on how to proceed and she also consulted with Gregory White, the U.S. attorney for the Northern District of Ohio.

Only after they assured her that a special audit would not interfere with any investigations, Ms. Montgomery announced the special audit.

She did so a week after the bureau announced it would end its rare-coin investment, saying it had concerns about the "ability of the managers to commit the necessary time and resources to make it profitable."

"It is my job to follow the money, no matter where it leads us. This case will continue to be our top priority,'' she said.

A "special audit" goes into much greater detail than a regular audit.

On April 5, Jen Detwiler, a spokesman for the auditor's office, said the rare-coin fund investments had not surfaced in previous audits contracted by the state auditor's office.

Two days later, Ms. Montgomery told The Blade that she learned of the rare-coin investments more than a year ago as the member of a committee searching for better investments for state pension funds.

"I was surprised," she said.

She said she called James Conrad, the bureau's administrator, and he said the investment had been one of the best returns for the bureau.

The state auditor's office hired KPMG in 1996 to a five-year contract to do the annual audit of the Bureau of Workers' Compensation, and renewed it in 2001, Ms. Detwiler said.

KPMG reviews all of the bureau's "alternative investments" and has reviewed Mr. Noe's Capital Coin since 1999, but bureau spokesman Jeremy Jackson said Friday he didn't know how detailed that review was.

KPMG declined comment on this article based on "client confidentiality," company spokesman Tom Fitzgerald said.

Ms. Detwiler said Friday that the special audit will examine if KPMG uncovered any problems in the rare-coin funds that Mr. Noe controlled.

But Mr. Redfern said Ms. Montgomery's explanation for why she waited until May 16 to announce a special audit doesn't ring true.

"She waited almost two months before finally engaging in some sort of oversight. It tells me campaign cash funneled to elected officials means we have a pay-to-steal environment in Columbus. No amount of fingerpoint will change that,'' said Mr. Redfern, who is weighing a run for state auditor next year.

Contact James Drew at:
jdrew@theblade.com
or 614-221-0496.

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